While it’s early yet to gauge the impact of the industry’s recent value rush—this should be an illuminating earnings call season—traffic does appear to have received a jolt. Revenue Management Solution’s July Trends report showed transactions rose, reversing what’s been a consistent downward spin of late. Although negative year-over-year at minus 2.3 percent, Q2 fast-food traffic was up compared to Q1, when it slid 3.5 percent.
Average price also declined quarter over quarter—a sign the steady flow of value deals are impacting the industry’s larger outlook. The figure rose 2.9 percent, year-over-year, in the quarter versus 3 percent in Q1.
Restaurants still have some ground to make up. Full-service prices, according to the BLS, rose 0.6 percent, year-over-year, in June. That’s up 3.9 percent annually. Quick service was 0.2 percent higher and 4.3 percent so far this year. Food-at-home prices climbed 0.1 percent and 1.1 percent, respectively.
Overall, restaurant prices are up 4.1 percent in the last 12 months ending June. For grocery, it’s 1.1 percent.
RMS also feels the decelerating rate of price increases signals customers are managing their checks with lower-priced menu items. Quantity per transaction has been steady, “indicating the loss-leader value meals may not generate additional sales of premium or add-on items,” it said.
Year-over-year, the quick-service snapshot looks as follows:
- Net sales: +1.7 percent
- Traffic: –2.3 percent
- Average check: +4.2 percent
- Average Price: +2.9 percent
- Quantity per transaction: +1.2 percent, but customers have reduced order sizes consistently throughout 2023.
By daypart, dinner has held more than lunch—also a consistent theme through recent months. Breakfast was down more than 2 percentage points from last quarter.
Delivery showed substantial gains and has been the top-performing sales channel, per RMS. Delivery traffic hiked 12.8 percent, year-over-year. Dine-in continues to climb as well, 8.3 percent over 2023. Takeout was positive at 7.6 percent, while drive-thru traffic declined 10.9 percent. The reason for the latter is as much a reaction to recalibration as any alarm flasher. Drive-thru now competes with the above options versus a time when it was often the only channel customers felt comfortable with. Even as mandates dropped away, those consumer habits took time to spread out into some semblance of a normal setting. That’s what’s showing today: drive-thru usage elevated from 2019 but not on the level of COVID times or the early rebound. But, as we’ll see shortly, drive-thru might soon hit the gas again.
Tracking the consumer
William Blair’s June report into engagement, digital trends, and brand affinity measured the pulse of value and some other evolving realities through survey data.
Firstly, overall restaurant engagement appears healthy, in terms of whether people want to dine out. Eighty percent of respondents said they eat at restaurants at least a few times (relative to 80 percent in March and 85 percent last year). Monthly spending was up 16 percent, year-over-year, with just 38 percent noting they were spending less relative to the prior year.
Both points are why William Blair’s feels consumer spending has been resilient despite rocky traffic patterns.
Additionally, reported restaurant interactions continue to grow, reaching an estimated 10 per month this quarter (up 7 percent from June 2023). Off-premises business accounted for 70 percent of that mix.
It’s becoming easier to see how COVID structurally changed consumer behavior; 41 percent of respondents said ordering for delivery and/or takeout has increase since 2019, relative to only 23 percent saying it had decreased. That data reflects RMS’ traffic figures, too.
This quarter, William Blair added, the reported frequency of drive-thru interactions exceeded takeout and delivery, “and we believe macroeconomic pressures could be driving the recent uptrend in drive-thru and takeout interactions,” the company said.
Essentially, customers are leaning into lower-fee interactions. That would seem misaligned with RMS’ data, but, again, not so much if you pull it back. Drive-thru is more popular today than it’s ever been—not accounting for the 2020–2021 stretch when it was a lifeline during chaos.
And how will that progress? William Blair’s survey said there was growing fatigue with the cost of eating out and ordering delivery. So diners might just be headed back to the drive-thru in the months ahead.
Nearly 60 percent of respondents also said they were comfortable using QR codes to order/pay for food in a restaurant. Forty-one percent were not. That nearly 60 percent figure (it was exactly 59 percent), was a notable increase from 43 percent in William Blair’s prior survey. Still, the company noted, open-ended commentary conveyed consumers, even those who are comfortable using QR codes, generally prefer physically menus. “Regardless,” William Blair’s report said, “results continue to indicate changing consumer preference/behaviors, with increased comfort around digital channels, and increasing comfort in using QR codes and self-service kiosks.”
The usage of brand loyalty programs jumped as well from the prior survey. Fifty-two percent of respondents in June said they were actively participating in one, up from 47 percent in March. That included 59 percent of respondents under 60 years old. Also, 41 percent said loyalty programs were either somewhat or highly influential on their decision where to eat (slightly higher than past reports), and the proportion who said loyalty programs do not sway their dining decisions showed a clear downward trend, as they have for five consecutive surveys.
Average monthly restaurant spending climbed 16 percent, year-over-year in the report to a survey record of $270. Increases among guests with household incomes under $150,000 offset declines for those earning more than $150,000, William Blair said.
The $270 result was inclusive of 50–60 percent increases among those with household incomes in the $50,000 to $100,000 range. As mentioned, it easily countered high-single-digit to mid-teens declines among guests from the $150,000-and-above pool. By age, restaurant spending was led by a nearly 40 percent jump among those over 60 years old and a mid-20 percentage gain for guests under 30.
Across its restaurant coverage, the percentage of respondents eating less often than last year outpaced the percentage eating more often for all brands except Dutch Bros. The largest sequential degradation was at Starbucks, Outback, Kura Sushi, and Portillo’s.
When asked why they’re eating less often at specific chains, “inconvenient” topped the list (cited for more than 70 percent of brands), followed by too expensive.
In the charts above, Starbucks appears to be the brand facing the most pushback on value from guests—a challenge it’s acknowledged and worked to address this year as traffic dropped 7 percent in Q2. Twenty-two percent of respondents said they’re eating there less often compared to last year, the most of any included brand. Forty-one percent cited “too expensive” as the reason they chose not to dine. Zero percent noted the same of competitor Dutch Bros. In that case, “convenience” topped the list. Likewise, it’s tackling the whitespace with mobile ordering, which the brand just launched for the first time.
MORE: Starbucks works to get faster, easier to operate
From a foot traffic perspective, Starbucks did see some lift from a recent Friday 50 percent off deal for app users, as reported by Placer.ai.
Compared to the year-to-date average, visits to Starbucks on Fridays following the LTO increased materially. Where the visits to Starbucks on May 3 (pre-promotion) were 1.1 percent lower year-to-day Friday visit averages, visits on May 10 (promotion launch) soared 20 percent above the number.
Unpacking some of the points
Roughly 83 percent of June respondents said they order or eat food from restaurants at least a few times a month. Six percent said they eat out daily. Eighty-three percent was a shade below last year’s 85 percent. It is clear macroeconomic conditions are softening traffic, even if average dollar spending per consumer climbed 16 percent in June. That percentage of people ordering food either a few times a week or daily was 48 percent for those under 60 years old, compared with only 39 percent for diners over 60. There was also a correlation to income level—about half of respondents earning more than $100,000 ordered food a few times a week or daily compared to those making less than $50,000, who said they do so only 39 percent.
In-person dining was the most common form of restaurant interaction (average of 3 days per month), followed by drive-thru (2.9 days), takeout (2.5 days), and delivery (1.7 days).
If the average number of days represents total interactions, it would indicate off-premises dining accounts for, as noted, more than 70 percent of the picture. This was William Blair’s first survey where drive-thru orders exceeded takeout (and was roughly in line with in-person interaction). “And we believe that persistent macroeconomic pressures may be causing some consumers to shift toward more affordable, drive-thru-equipped dining options like fast food,” the company reiterated.
Compared to pre-pandemic times, roughly 41 percent of respondents said their frequency of ordering delivery and/or takeout has increased, including 15 percent who noted a significant increase. Thirty-six percent said they’re ordering delivery the same as they did in 2019. Just 23 percent said they’re ordering delivery less often.
Ordering methods under review
Despite all the digital growth, the most prevalent ordering method remained in person or over the phone (about 44 percent for takeout, down from 49 percent last survey). It was 36 percent for delivery, a 1 percentage point slide from the prior survey. Direct ordering through a restaurant’s website or app followed at 33 percent for takeout, climbing from 32 percent, and 31 percent for delivery, rising from 27 percent. The use of third-party aggregators was much higher for delivery—20 percent of orders in June versus 24 percent in March—than takeout, where it was responsible for 7 percent of orders in June compared to 6 percent in December.
By age group, excluding respondents over 60, the percentage ordering in person or over the phone was 37 percent for takeout, down from 42 percent, and 26 percent for delivery, a decrease from 28 percent. When ordering for delivery, respondents under 60 years old were more likely to order direct (32 percent) or use third-party marketplaces (28 percent). “We continue to believe that demographic shifts and growing comfort with digital channels will drive an ongoing mix shift toward digital ordering by consumers,” William Blair said.
In sum, phone and in-person ordering are holding, but the trends are pushing from the bottom up, and dominated by usage from younger generations.
For those diners using delivery or takeout, the most frequently selected reasons were convenience and time constraints. Seventy-one percent indicated those were the main factors. Preference not to cook (25 percent) came next.
William Blair also asked about QR code usage over a mobile device for menu browsing, ordering, and payment, as well as in-store kiosks. If QR codes and/or kiosks continue to become more ubiquitous, the company said, it will present another factor that could support additional restaurant order/payment volume flowing through digital channels.
While at a restaurant, 41 percent of respondents said they were not comfortable using QR codes over a mobile device, down from 57 percent in the prior survey. Yet reflective of the earlier point, when analyzing data by age, William Blair found only 46 percent of people under 60 were not comfortable doing so, as opposed to 76 percent of customers over the age of 60. When asked about kiosks, 59 percent of respondents said they were comfortable navigating the menu, ordering, and paying for food through them. While individuals continue to express some preference for physical menus since the proliferation of QR codes during COVID, William Blair said, respondents seem to be increasingly comfortable with the prevalence and functionality of kiosks.
